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Is 1 lakh a good salary?

Everyone unanimously agreed that the ₹1 lakh figure looks good on paper but it goes only so far after factoring in rent, bills, groceries, salaries of domestic helps and lifestyle spending, particularly when living in a metro.

livemint.com - Is ₹1 lakh monthly salary a big deal for young professionals? - Mint

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Hyderabad resident Surya Chaudhary earns a little over ₹1 lakh every month, a milestone he aspired for since the beginning of his career five years ago. While he is able to afford a comfortable lifestyle with that salary, he says it is conservative when compared to what he had expected. “I cook my own breakfast as the maid charges ₹1,500 extra," he says. Chaudhary starts his day with a trip to CultFit gym (it cost him ₹10,000 for a four-month subscription). He commutes to work by an electric scooter, which he bought in January for ₹90,000, after he was asked to return to the office post pandemic. “My office is only 5 km away but cab fares have soared, and cost ₹120- ₹150 even for short distances," said Chaudhary, who works as a consultant in a MNC. Chaudhary says he spends about 65% of his salary on rent, utilities and EMIs, 10% on shopping and eating out and saves the remaining 25% for short-term needs. “ ₹1 lakh sounds flashy, but for a bachelor living in a tier-1 city, it provides just about a comfortable lifestyle. If I had to support a family on this salary, I would have to economise massively," he said.

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In Udaipur, Rithvi Somani’s monthly expenses look entirely different (see chart). She lives with her parents and thus saves on rent and bills. “If I was living in Mumbai where my company is headquartered, I would only be able to afford a mediocre lifestyle after paying house rent," Somani said. For a fresher, Somani’s salary of ₹1.15 lakh will be envied by most graduates, but she feels this isn’t just enough. “There is always something left in the cart or with an unreachable price tag," said the 24-year-old who studied law in the UK. She also has a ₹25 lakh education loan that takes away 30% of her income. Chaudhary and Somani aren’t the only people who think they ought to be earning more to lead a better lifestyle. Mint spoke to many young professionals in different cities about the lifestyle a ₹1-1.2 lakh monthly salary can get them. Everyone unanimously agreed that the ₹1 lakh figure looks good on paper but it goes only so far after factoring in rent, bills, groceries, salaries of domestic helps and lifestyle spending, particularly when living in a metro. Rising inflation in the last one year has only made matters worse, said Zoya Seth, a Delhi-based freelance content writer. “ I spend ₹40,000 every month on just meeting basic needs. I see people spend ₹20,000-25,000 on petrol alone. Healthcare costs have gone through the roof. A visit to the doctor and any medical tests burn a big hole in the pocket," she said. The 30-year-old is quick to add that she feels self-sufficient with her current income of ₹80,000- ₹1.1 lakh every month, and is left with enough disposable income after paying off her bills.

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One common reason for the ₹1 lakh figure falling short in most cases is a rise in aspirational spending. For instance, in metros, a dinner plan that includes drinks can easily cost ₹1,500-2,000 per person. Most people also have a standalone travel budget that takes up 10-20% of their monthly income. However, this typically comes at a trade-off with savings. For instance, Chaudhary said he is yet to start investing as he’s not left with enough after paying for essentials and personal expenses. “I’m working on my own venture on the side and that takes up all my remaining income ," he said. Bhubaneshwar-based Debroop Roy (see chart) believes one can live comfortably on this salary, unless there are massive liabilities. “I don’t think one can manage too many loans and live comfortably on this income, since one also needs to invest and save for the future," he said. The number of years before you start earning in the ₹1 lakh range and other obligations also make a difference. For Divya Kumar (see picture), 33, after meeting her basic needs, supporting parents and investing for her future, a salary of a little over ₹1 lakh doesn’t leave much. “It took me about six years to reach an annual pay package of ₹12 lakh and it’s not much given the cost of living in Mumbai," she said. However, this income has enabled Kumar to fulfil her dream of an international holiday. “I could take my first foreign vacation to Singapore after I crossed the ₹12 lakh per year mark. I’m saving up for Europe now," she said. Roy, 26, says his current salary allows him to splurge on one luxury he enjoys the most—staying in 5-star hotels during holidays. “I don’t think twice before spending on things I like. For instance, I recently bought a gym membership for ₹16,000 in a blink, which I wouldn’t have earlier," he said.

Head-start on investing

The ₹1 lakh income range gives enough disposable income for young earners to invest. Roy has been working since the age of 21 years but started investing only last year after he got a major pay hike. “I would pay rent and spend on other essentials and save whatever was left, which won’t be much on a salary of ₹40,000-50,000. I was able to start saving meaningfully and investing only after my income went above ₹80,000-90,000," said Roy. Financial planners would argue that waiting for higher disposable incomes to start investing is not the right approach but Roy begs to differ. “Investing ₹2,000-4,000 by cutting corners takes away the fun of newly attained financial freedom," he said. Currently, Roy invests 20% of his salary and saves another 20% for emergencies and short-term requirements. Somani ensures that she stashes away about one-fourth of her salary every month in savings.

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The ₹1 lakh dream salary

Young professionals believe that a six-figure monthly income is no longer a benchmark for a successful career as inflation and rising aspirational spending have rendered it insufficient. “While I think ₹1 lakh salary is not entirely the norm, it is easier to get to this number if you are working in the private sector, especially in cities such as Bengaluru, Delhi-NCR or Mumbai," said Roy. Industry experts concur. Rituparna Chakraborty, co-founder and executive director, TeamLease Services, said “ ₹2 lakh is the new ₹1 lakh. There’s a certain amount of reset in the aspiration of young professionals. Entry level incomes too have risen to keep up with rising expectations. “Average pay packages at junior and mid-senior levels, across sectors, have grown by 18-20% in the last five years," said Sanjay Shetty, director-professional search & selection and strategic accounts, Randstad India. However, the figure still reflects a certain social status, especially in tier-2 and tier-3 cities. “I don’t reveal my salary to my friends in Udaipur. It is still considered a big amount in small cities and may build up the expectation that I can afford to pick bills on everyone’s behalf at every outing," said Somani. Roy chuckled when he said it is a desirable salary in the marriage market. “People here (Bhubaneshwar) see me as someone who makes good money. Being able to earn a ₹1 lakh salary makes me financially settled for marriage," Roy said.

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livemint.com - Is ₹1 lakh monthly salary a big deal for young professionals? - Mint